Blaise Gnimassoun & Valérie Mignon , 2013.
"How Macroeconomic Imbalances Interact? Evidence from a Panel VAR Analysis,"
CEPII Working Paper 2013- 42 , December 2013 , CEPII.
This paper aims at investigating the interactions between three key macroeconomic imbalances, namely Global imbalances,current-account discrepancies (external imbalances), output gaps (internal imbalances), and exchange-rate misalignments. To this end, we rely on the estimation of a panel VAR model for a sample of 22 industrialized countries over the 1980-2011 period. Our findings show that macroeconomic imbalances strongly interact through a causal relationship. We evidence that if current-account disequilibria threaten the stability of the global economy, their origin can be found in internal imbalances and exchange-rate misalignments: positive output-gap shocks as well as currency overvaluation deepen current-account deficits. In addition, while variations in external imbalances mainly result from exchange-rate misalignments in the euro area, they are mostly explained by output gaps for non-eurozone members.
Global imbalances ; current account ; output gap ; exchange-rate misalignments ; panel VAR